If you’ve experienced random flickering and color issues with your second generation Apple TV since the last iOS update, rejoice, as Apple just released a new update to the device’s firmware, designed to fix the problem.
The update, dubbed version 4.2.1, also brings stability improvements, and squashes a slew of bugs, including “wake from sleep” issues, muted audio.

TV compatibility: Addresses issues that may cause the screen to flicker or display incorrect color on some older TVs.

Wake from sleep: Addresses an issue where Apple TV may not wake up from sleep.

Audio: Addresses an issue where audio may not be heard on some TV models after switching from another input.

Of course, the new update also includes all the features brought by the 4.2 firmware, such as AirPlay support for third party apps, as well as MLB.TV and NBA Game Time support, to name a few.
You can update your Apple TV directly from the device’s main menu, or alternatively, the firmware can be downloaded here.